xirr prorated?

[Guest]

Hi,

I've been reading that xirr calculates values assuming a 365 day year. Do
you have to pro rate the formula for projects that have been less than a
year? I'm trying to figure out the rate of return on my investments. I began
investing in a fund in the middle of 2004. I still hold the fund now. Is it
necessary to pro rate 2004 and 2006 values as 2004 was not the whole year and
2006 is not yet over?

 

[Ron Rosenfeld]

Hi,

I've been reading that xirr calculates values assuming a 365 day year. Do
you have to pro rate the formula for projects that have been less than a
year? I'm trying to figure out the rate of return on my investments. I began
investing in a fund in the middle of 2004. I still hold the fund now. Is it
necessary to pro rate 2004 and 2006 values as 2004 was not the whole year and
2006 is not yet over?

XIRR, by design, gives an annualized rate of return. It is designed to work
with non-annual periods.




--ron